Single & Multi Family
What is a Short Sale?
Short sale is when the net proceeds of a property sale does not cover all debts that liens have secured against that property. Meaning, is selling a property at a price less than what the current owner owes.
For instance, the amount owed by a homeowner can be $650,000 on a mortgage. However, the value of the home in question can be $500,000. As such, there is a negative equity of $150,000.
Why would a bank agree to a short sale?
Well, despite that it seems that they are in the 'house business', lenders are in more a money business.
They are not interested in owning homes. When a lender takes a property back and forecloses it, the property is considered a non-performing loan.
Hence, this financial operation is well-seeing to banks or lenders because it avoids repossessing properties through foreclosures. The foreclosure process is time-consuming and expensive. On the other hand, this sale enables the sellers to avoid a negative hit on their credit score that a foreclosure causes, as well as the bankruptcy that accompanies it in some cases.
What is the Short Sale Process?
The process of a short sale can be divided down into nine steps as follows:
Step 1: Send the Sender Authorization
Step 2: Follow Up and Request a Short Sale Package
Step 3: Complete the Short Sale Package
Get all documents that the foreclosure lender requires. Generally, it’s wise to collect all documents necessary from the property owner before you initiate the short sale process.
In most cases, the short sale process requires the following documents:
Offer overview or the letter sent to the lender
Cost estimate for repair
Hardship letter for the sale
Financial statement of the borrower
Income proof of the borrower
Sale explanation and offer
Savings and checking account statements
Sale and purchase agreement
HUD 1 settlement statement
Buyer’s proof of funds letter
Power of attorney
Step 4: Submit the Short Sale Package to the Lender
Step 5: Follow Up on Short Sale Package Receipt
Step 6: Schedule a BPO or Appraisal for the Short Sale
Step 7: Educate Your Evaluator
If you don’t get a good deal or if you get a too high BPO/appraisal, the sale can end instantly. However, you can schedule an appointment with the appraiser or BPO agent and set up a meeting at the property.
Step 8: Start Negotiations with the Loss Mitigator
After reviewing the BPO/appraisal with the sale document and current offer, the mitigator can decline, accept, or counter your offer.
Step 9: Short Sale Acceptance